Derivatives Usage in Risk Management by US and German Non-Financial Firms: A Comparative Survey / Gordon M. Bodnar, Gunther Gebhardt.

Format:

Book

Author/Creator:

Bodnar, Gordon M.

Contributor:

National Bureau of Economic Research.

Gebhardt, Gunther.

Series:

Working Paper Series (National Bureau of Economic Research) no. w6705.

NBER working paper series no. w6705

Language:

English

Subjects (All):

Derivative securities--Econometric models.

Derivative securities.

Corporations--Finance--Mathematical models.

Corporations.

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Derivatives Usage in Risk Management by US and German Non-Financial Firms

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1998.

Cambridge, Massachusetts : National Bureau of Economic Research, 1998.

Summary:

This paper is a comparative study of the responses to the 1995 Wharton School survey of derivative usage among US non-financial firms and a 1997 companion survey on German non-financial firms. It is not a mere comparison of the results of both studies, but a comparative study, drawing a comparable subsample of firms from the US study to match the sample of German firms on both size and industry composition. We find that German firms are more likely to use derivatives than US firms, with 78% of German firms using derivatives compared to 57% of US firms. Aside from this higher overall usage, the general pattern of usage across industry and size groupings is comparable across the two countries. In both countries, foreign currency derivative usage is most common, followed closely by interest rate derivatives, with commodity derivatives a distant third. In contrast to the similarities, firms in the two countries differ notably on issues such as the primary goal of hedging, their choice of instruments, and the influence of their market view when taking derivative positions. These differences appear to be driven by the greater importance of financial accounting statements in Germany than the US and stricter German corporate policies of control over derivative activities within the firm.

Notes:

Print version record

August 1998.